Your Taxes

I am 79. I have filed IT returns since 2012 because of taxable income by way of rent and capital gains. In 2012, I sold a plot and invested the capital gain of ₹50 lakh in REC bonds earning ₹3 lakh per annum, which is maturing in January 2016.  Can I invest in a land or a new flat to avoid taxes or do I have to pay taxes on this fully?  I am turning 80 in September 2016.  Will I get the benefit of super senior citizen in AY 2016-17?

J Swaminathan

 According to the provisions of Section 54EC of the Income Tax Act, 1961, an individual can claim exemption of capital gains from the sale of long-term capital assets, provided he invests the whole or part of the capital gains in bonds issued by National Highways Authority of India (NHAI) or Rural Electrification Corporation (REC) (which would have a lock-in period of three years from the date of acquisition of such bonds) within the specified period. Further, the maturity proceeds from such investments (in NHAI/REC bonds) shall be deemed to be income chargeable under the head ‘capital gains’ if the same is transferred or converted (otherwise than by transfer) into money at any time within three years from the date of its acquisition.

 Considering the above and given that you have held the investment in REC bonds for more than three years, the maturity proceeds from such investment would not be taxable in your hands during the FY 2015-16. However, the interest income amounting to ₹3 lakh per annum, which you have earned from this investment, would still be taxable on a year-on-year basis.

 The cut-off date for determining the category (senior citizen/super senior citizen, etc) is March 31 of the relevant year. In your case, you would not have turned 80 as of March 31, 2016 and, hence, you would still be regarded as a senior citizen during AY 2016-17.

I am a senior citizen (64 years) and have annual income of ₹2.65 lakh from a contract job. I stopped my mutual fund SIPs about 18 months ago. This month, I redeemed a part of my holding (after holding for more than a year) and have received ₹9 lakh after deduction of STT. Do I need to pay income tax on the amount received? Do I need to submit income tax return for the year 2015-16 showing this gain ?

Augustine Joseph

 Tax implication varies with the type of mutual fund investment made through the SIP plans. Since your redemption has suffered STT deduction and as STT is not applicable for debt funds, we are of the view that the same would be an equity-oriented MF. The gains arising on the sale of these equity-oriented units will be considered long term as you have held them for more than 12 months. 

 According to Section 10 (38) of the Income Tax Act, 1961, the capital gain arising on sale of shares/units held for more than 12 months is exempt if STT is paid on it. Accordingly, the redemption amount received by you would be exempt from taxation. It is not mandatory to file an income tax return if the taxable income is less than the basic exemption limit of ₹300,000 applicable for senior citizens. 

The writer is Partner, Deloitte, Haskins and Sells, LLP. Send your queries to taxtalk@thehindu.co.in